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The Collaborative Clearinghouse for Lawsuits and Other Claims Against ACE Group Insurance Companies

HINDS COUNTY SCHOOL DISTRICT v. ACE AMERICAN INSURANCE COMPANY

ATTENTION: It is possible that this information may no longer be current and therefore may be inaccurate. The index contains both open and closed cases and is not a complete list of cases in which an ACE Insurance Group company is involved. This information is provided to give interested persons an idea of the issues disputed in the indexed cases. For a full understanding of a case, one should read the rest of the court file, including the response. For the most up-to-date and complete information on a case, visit www.pacer.gov or contact the clerk of the relevant court.

Case Number: 
3:13-cv-00125 Search Pacer
ACE Group party(s): 
Opposing Party: 
Hinds County School District
Court Type: 
Federal
US District Court: 
Southern District of Mississippi
Date Filed: 
Mar 1 2013

"IV. CLAIMS AGAINST AAIC
A. Claim for Declaratory Judgment that AAIC Policy Provides Coverage

23. Plaintiff Hinds County, incorporates and adopts by reference each and every fact and allegation set forth in the preceding and following paragraphs.

24. From July 1, 2009 until July 1, 2010, HCSD was covered under the AAIC Policy.

25. The Underlying Plaintiffs filed the underlying original Complaint against HCSD within the Policy Period (on June 17, 2010), and HCSD reported the claim within the time and manner required by the AAIC policy. Underlying Plaintiff later amended this Complaint raising allegations that the minor child's civil rights were violated.

26. The Underlying Plaintiffs brought several claims against HCSD in the underlying Complaints, including. Negligence, Conspiracy, Breach of Fiduciary Duty, Intentional or Negligent Infliction of Emotional Distress, Negligence: Assignment, Hiring and Retention, Negligent Misrepresentation and civil rights violations under 42 U.S.C. § 1983.

27. As a result of these claims, HCSD timely demanded coverage from AAIC, under the AAIC Policy.

28. In response to said demand for coverage, AAIC issued a denial of coverage letter on or about August 2010.

29. However, AAIC's denial of coverage was erroneous because Underlying Plaintiffs are clearly alleging claims against Hinds County for alleged acts and omissions in the negligent hiring, training, supervision, retention of a teacher, as well as alleged civil rights violations, resulting in alleged damages to the minor child, which specifically included Mental Distress. The AAIC Policy clearly covers the foregoing claims given that "Wrongful Employment Practice" includes "negligent supervision"' and "negligent hiring, retention, training or supervision; infliction of emotional distress or mental anguish; failure to provide or enforce adequate or consistent corporate policies and procedures; or violation of an individual's civil rights." See AAIC Policy, at p. 14.

30. Moreover, the AAIC Policy specifically exempts from the Bodily Injury exclusion "Mental Distress arising out of a Wrongful Employment Practice." See AAIC Policy, at p. 15. There is no question that both under the original Complaint and the Amended Complaint, Underlying Plaintiffs are seeking damages for "Mental Distress." Specifically, in their original Complaint, Underlying Plaintiffs sought damages for, among other things, "pain and suffering in the past and in all reasonable probability will sustain pain and suffering in the future as a result of her psychological injuries." See Complaint, at p. 12. Similarly, in the Amended Complaint. Underlying Plaintiffs seek "compensatory damages for physical and emotional injuries." See Amended Complaint, at p. 17. Because the damages sought in the underlying Complaints are, in part, for Mental Distress, the Underlying Plaintiffs' claims against Hinds County were, and are, covered by the AAIC policy.

31. Based on the foregoing, the Underlying Plaintiffs' claims against HCSD were, and are, covered by the AAIC policy. Yet, AAIC has denied coverage in bad faith without adequate investigation and without arguable basis.

32. As a result of AAIC's improper denial of coverage under the AAIC Policy, which occurred without any substantive investigation and/or arguable basis, HCSD has been forced to incur attorney's fees and other costs associated with securing coverage that AAIC was contractually obligated to provide.

33. Accordingly, HCSD respectfully request that this Court:
(a) Enter a declaratory judgment that the terms and conditions of the AA1C Policy require that AAIC provide liability coverage for the claims brought by the underlying Plaintiffs and that no exclusions relieve AAIC of any duty which exists under the AAIC Policy;
(b) Order an expedited hearing on HCSD's Complaint for declaratory relief;
(c) Award attorney's fees, as well as all other costs, incurred in investigating coverage and bringing the instant claim for declaratory judgment under the AAIC Policy; and/or
(d) Grant HCSD such other general, legal, equitable or declaratory relief as this Court deems necessary or appropriate.
B. Claim Against AAIC for Bad Faith Failure to Investigate and Bad Faith Denial of Insurance Benefits

34. HCSD re-states, re-alleges and incorporates and adopts by reference each and every fact and allegation set forth in the preceding and following paragraphs, and further alleges that:

35. HCSD was entitled to insurance coverage under the AAIC Policy for claims made and reported within the Policy Period.

36. After the Claim was promptly and timely reported by HCSD, AAIC had a duty to investigate whether it owed HCSD coverage under the AAIC Policy.

37. AAIC utterly breached this duty by failing to perform any meaningful investigation in terms of the claims brought forth by the Underlying Plaintiffs and their coverage obligations with respect to those claims under the plain language of the AAIC Policy.

38. Specifically, AAIC's investigation was so cursory that it either failed to review the allegations of the Complaint, or was deliberately, willfully and purposefully indifferent to the claims therein for emotional distress and mental anguish caused by the alleged Claims and Wrongful Employment Practice.

39. AAIC has failed to conduct any additional investigation or inquiry into the claims and damages sought by the Underlying Plaintiffs and whether such claims are legitimately covered under the subject policy.

40. AAIC had no arguable reason for failing to investigate or denying HCSD's claim for insurance benefits. According, AAIC's failures constitute bad faith under Mississippi law.

41. As a result of AAIC's bad faith, HCSD has suffered, and continues to suffer, damages, including, without limitation, attorney's fees and other costs associated with seeking to enforce its rights under the AAIC Policy.

42. Accordingly, HCSD is entitled to all compensatory damages, attorney's fees and other costs incurred as a result of AAIC's bad faith failure to investigate, and bad faith denial of, coverage under the AAIC Policy at issue in this case.

43. Moreover, AAIC's bad faith denial warrants the imposition of punitive damages.
C. Claims Against AAIC for Breach of Contract and Bad Faith Breach of Contract

44. HCSD restates, re-alleges and incorporates and adopts by reference each and every fact and allegation set forth in the preceding and following paragraphs, and further alleges that:

45. From July 1, 2009 until July 1, 2010, HCSD was covered under the AAIC Policy.

46. The Underlying Plaintiffs filed the underlying original Complaint against HCSD within the Policy Period (on June 17, 2010), and HCSD reported the claim within the time and manner required by the AAIC policy. Underlying Plaintiff later amended this Complaint raising allegations that the minor child's civil rights were violated.

47. The Underlying Plaintiffs brought several claims against HCSD in the underlying Complaint, including, Negligence, Conspiracy, Breach of Fiduciary Duty, Intentional or Negligent Infliction of Emotional Distress, Negligence: Assignment, Hiring and Retention, Negligent Misrepresentation and civil rights violations under 42 U.S.C. § 1983.

48. As a result of these claims, HCSD timely demanded coverage from AAIC, under the AAIC Policy.

49. In response to said demand for coverage, AAIC issued a denial of coverage letter on or about August 2010.

50. However, AAIC's denial of coverage was erroneous because Underlying Plaintiffs are clearly alleging claims against Hinds County for alleged acts and omissions in the negligent hiring, training, supervision, retention of a teacher, as well as alleged civil rights violations, resulting in alleged damages to the minor child, which specifically included Mental Distress. The AAIC Policy clearly covers the foregoing claims given that "Wrongful Employment Practice" includes "negligent supervision" and "negligent hiring, retention, training or supervision; infliction of emotional distress or mental anguish; failure to provide or enforce adequate or consistent corporate policies and procedures; or violation of an individual's civil rights." See AAIC Policy, at p. 14.

51. Moreover, the AAIC Policy specifically exempts from the Bodily Injury exclusion "Mental Distress arising out of a Wrongful Employment Practice." See AAIC Policy, at p. 15. There is no question that both under the original Complaint and the Amended Complaint, Underlying Plaintiffs are seeking damages for "Mental Distress." Specifically, in their original Complaint, Underlying Plaintiffs sought damages for, among other things, "pain and suffering in the past and in all reasonable probability will sustain pain and suffering in the future as a result of her psychological injuries." See Complaint, at p. 12. Similarly, in the Amended Complaint, Underlying Plaintiffs seek "compensatory damages for physical and emotional injuries." See Amended Complaint, at p. 17. Because the damages sought in the underlying Complaints are, in part, for Mental Distress, the Underlying Plaintiffs' claims against Hinds County were, and are, covered by the AAIC policy.

52. Yet, AAIC has denied coverage in bad faith without adequate investigation and without arguable basis. Given that the Underlying Plaintiffs' claims against HCSD are clearly covered under the AAIC Policy, AAIC's denial of coverage constitutes breach of contract. Moreover, given AAIC's failure to conduct any investigation, much less the investigation required by Mississippi law, AAIC's denial of coverage was without any arguable reason, thereby constituting bad faith breach of contract.

53. As a result of AAIC's breach of contract and bad faith breach of contract, HCSD has suffered damages, including, but not limited to, attorney's fees and associated costs expended in attempting to enforce its contractual rights under the AAIC Policy.

54. Accordingly, HCSD is entitled to all compensatory damages, attorney's fees and other costs incurred as a result of AAIC's breach of contract and bad faith breach of contract.

55. Moreover, AAIC's bad faith breach of contract warrants the imposition of punitive damages.
D. Claim for Bad Faith Breach of Duty of Good Faith and Fair Dealing Under the AAIC Policy

59. HCSD restates, re-alleges and incorporates and adopts by reference each and every fact, allegation and denial set forth in the preceding and following paragraphs, and further alleges that:

60. AAIC was under a duty to engage in good faith and fair dealing in the execution of the AAIC Policy.

61. AAIC has failed to satisfy this duty, without any arguable reason, thereby constituting bad faith. Specifically, AAIC's bad faith actions include, but are not limited to, the following:
a. Failing to adequately review the substantive allegations of the Complaint and Amended Complaint;
b. Failing to review and fairly interpret its own insurance policy in reference to the allegations made by the Underlying Plaintiffs in their Complaint and Amended Complaint;
c. Failing to conduct any investigation into the claims made by the Underlying Plaintiffs as relates to their allegations of mental and emotional distress damages allegedly stemming from the Claims and Wrongful Employment Practices;
d. Failing to adequately review and fairly interpret the exclusions of its policy; and/or
c. Denying insurance coverage on the basis of a purported coverage exclusion, which clearly does not apply to the subject claim.

62. AAIC's bad faith breach of the duty of good faith and fair dealing has proximately caused HCSD to suffer damages, including, but not limited to, attorney's fees and other associated costs incurred as a result of AAIC's bad faith failure to investigate, and bad faith denial of, coverage under the AAIC Policy at issue in this case.

63. Accordingly, HCSD is entitled to all compensatory damages, attorney's fees and other costs incurred as a result of AAIC's bad faith breach of the duty of good faith and fair dealing under the AAIC Policy."

The provided text is an excerpt from a document filed in this case. For a full understanding of the case, one should read the complete court file, including the response.

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